The best part is our people.




2001 Annual Report   Advance Auto Parts
Contents




Financial Highlights     2

Stockholders’ Letter    4

Company History          6

Our Stores               9...
Maine 7
                                                                                                                  ...
Financial                  Highlights                                                                                     ...
Stockholders’               Letter                                                                                        ...
Advance          Auto     Parts       History




Like many great companies, Advance Auto Parts was                       ...
Our     Stores




                                                                                                       ...
continued from previous page


     Customer service is at the heart of our        Discount Auto Parts was founded in     ...
Robert Bannister, Receiving Clerk Robert receives shipments from our vendors, making sure those needed immediately get int...
Commercial               Program




                                                                                     ...
Report         of    Independent                 Public         Accountants             Advance Auto Parts, Inc. and Subsi...
Advance Auto Parts, Inc. and Subsidiaries                                                                                 ...
advance auto parts 2001ar
advance auto parts 2001ar
advance auto parts 2001ar
advance auto parts 2001ar
advance auto parts 2001ar
advance auto parts 2001ar
advance auto parts 2001ar
advance auto parts 2001ar
advance auto parts 2001ar
advance auto parts 2001ar
advance auto parts 2001ar
advance auto parts 2001ar
advance auto parts 2001ar
advance auto parts 2001ar
advance auto parts 2001ar
advance auto parts 2001ar
advance auto parts 2001ar
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advance auto parts 2001ar

  1. 1. The best part is our people. 2001 Annual Report Advance Auto Parts
  2. 2. Contents Financial Highlights 2 Stockholders’ Letter 4 Company History 6 Our Stores 9 Supply Chain 12 Commercial Program 15 Financials And Other Information 16
  3. 3. Maine 7 Vermont 2 New Hampshire 4 Wisconsin Massachusetts 20 South Dakota 6 16 New York 96 Rhode Island 3 Michigan Wyoming 2 Connecticut 24 47 Pennsylvania 132 Iowa 24 New Jersey 21 Nebraska 16 Ohio 140 Illinois 23 Indiana Delaware 5 West 68 Maryland 30 Colorado 15 Virginia Virginia 125 62 Kansas 26 Missouri 37 Kentucky 66 North Carolina 174 Tennessee 117 Oklahoma 2 South Carolina Arkansas 21 100 Mississippi Georgia 253 65 Alabama 113 Louisiana Texas 51 70 Florida 461 California 1 Puerto Rico 37 Virgin Islands 2 Advance Auto Parts, Inc. is the second-largest auto stores. As a result What makes an Advance Auto Parts parts retailer in the United States. We ended our 2001 of our expansion store unique? Why are more and more do- fiscal year on December 29, 2001 with 2,484 stores from both new it-yourselfers and professional installers in 38 states, Puerto Rico, and the Virgin Islands. store openings and choosing us despite the many alternatives We experienced substantial growth during strategic acquisitions, we are the largest available? Once you have visited one of 2001. The most dramatic indication was the specialty retailer of automotive products our stores, you’ll know. It’s the broad increase in the number of stores we in a majority of the states where we do selection of products. It’s the store full of operate. We increased the number of stores business, as measured by stores in value prices. But more than anything else, we operate by 43.7%, adding 755 net new operation. the best part is our people. ADVANCE AUTO PARTS ANNUAL REPORT 2001 1
  4. 4. Financial Highlights Sales (in millions) $ 2,518 $ 2,288 $ 2,207 The best part is our people $1,221 We believe Advance Auto Parts has the best team in the automotive $ 848 aftermarket. Whether in our stores or behind the scenes, we work as a team 1997 1998 1999 2000 2001 to provide our customers the highest level of customer service, broad Comparable Store Sales product selection, excellent value prices, and conveniently located stores. (in percentages) 10.3 Our first priority is outstanding customer parts, but also knowledgeable and 7.8 service. Whether our customers are friendly advice to make sure the job is 6.2 5.7 4.4 replacing their engine, brakes, or just an done right the first time. We do whatever oil filter, our team members are there to it takes to build lasting relationships with 1997 1998 1999 2000 2001 make sure they not only have quality our customers. Gross Profit* (in millions) By focusing on our customers, our team achieved strong results this year: $1,076 $896 2001 2000 Increase $803 Sales (In thousands) $ 2,517,639 $ 2,288,022 10.0% Comparable Store Sales 6.2% 4.4% $ 455 Operating Income*(In thousands) $ 123,770 $ 92,789 33.4% $324 Operating Margin 4.9% 4.1% EBITDA, as adjusted* (In thousands) $ 199,710 $ 161,876 23.4% 1997 1998 1999 2000 2001 Income before extraordinary item and cumulative effect of a change in EBITDA, as adjusted* accounting principle (in thousands)* EBITDA, as adjusted* (In thousands) $ 38,097 $ 16,626 129.1% (in millions) $ 200 Income before extraordinary item and $162 cumulative effect of a change in accounting principle per diluted share* Earnings Per Share* $ 1.31 $ 0.58 125.9% $122 $93 * 2001 results of operations listed above excludes non-recurring expenses recorded in the fourth quarter of 2001 associated with $ 68 our supply chain initiatives, the impairment of assets held for sale, merger related restructuring, merger and integration expenses and non-cash stock option compensation expenses. (See accompanying financial statements and related footnotes and management's discussion and analysis of financial condition and results of operations included elsewhere in this report.) Tommy Garth, Customer Service Tommy came to Advance Auto Parts with five years experience as a mechanic. He now uses that practical experience to help 1997 1998 1999 2000 2001 customers determine their vehicle’s problem – and then makes sure they have all the necessary parts to fix it. He often knows the insider tips that make the job easier. Tommy’s loved cars since he was five years old – and our customers love Tommy. 2 ADVANCE AUTO PARTS ANNUAL REPORT 2001 3
  5. 5. Stockholders’ Letter of the strongest and fastest growing DIY The integration of Discount Auto Parts • Continuing to develop and launch markets in the country. is on track. Our experienced acquisition exciting merchandising and On April 23, 2001 Advance Auto Parts team is executing its proven integration marketing initiatives, including the acquired the assets of Carport Auto Parts, plan. And the Discount Auto Parts team full roll-out of category management. Inc., a regional retailer with stores in members are fully committed to making • Enhancing the efficiency of our It’s indeed a privilege to share our Alabama and Mississippi. Within three the transformation a success. supply chain. first annual report as a public months, our team had fully converted the The conversion of Discount Auto Parts • Rolling-out our proprietary state- company with you, our stockholders. 30 Carport stores into Advance Auto Parts stores into the Advance Auto Parts store- of-the-art electronic parts catalog to We truly believe that “The Best Part Is stores. From the date of their conversion at format should be completed by the end of all stores. Our People,” and you will see that the first of July until the end of the year, these fiscal 2002 in markets where we already In summary, 2002 will be a year where they have accomplished much on Jim Wade, President and Chief Financial Officer Larry Castellani, Chief Executive Officer stores produced a 27 percent increase in sales. have stores. The new Florida markets are we will implement initiatives to serve our your behalf this year. We are pleased to welcome the expected to have their inventory, supply customers better and focus on increasing Our team members are on the front lines $2.5 billion, rising 10 percent. the first time. At the end of that day, the Discount Auto Parts and Carport Auto chain support and in-store systems operating margins and return on invested • Expanding our operating margins 80 every day implementing our formula for market value of the company was more Parts team members into our family. As converted in 2002. These stores will be capital. success. This consists of the highest level of basis points for the year, before than $1.3 billion. members of the same team, we will converted to the Advance Auto Parts At this time, we would like to thank all customer service, a broad selection of one-time expenses, to 4.9 percent To enhance our already strong position continue to offer our customers the very format beginning in the fourth quarter of our customers for their business, our quality parts and products at value prices, from 4.1 percent last year. as the second-largest automotive retailer in highest levels of service, quality, and value. 2002 and continue market-by-market over stockholders for your support, and our • Achieving earnings per share of conveniently located stores, an efficient the United States, we completed two Our accomplishments for 2001 are just the next 3 years. team members who continue to produce supply chain and leading edge technology. $1.31, before one-time items, acquisitions in 2001. The largest and most the beginning. As we move into 2002, the We are focusing on increasing the strong results. Working together, our team members compared to $0.58 the prior year, strategic acquisition was completed on automotive aftermarket continues to show profitability of our stores by taking the served well over 100 million satisfied an increase of 125.9 percent. November 28, 2001 when we acquired the prolonged strength as more miles are being following steps: customers and produced strong financial One of the most exciting events for all 671-store Discount Auto Parts chain. These • Producing strong comparable driven, vehicles are getting older and the Jim Wade results during 2001. of us at Advance Auto Parts took place on stores, located in Florida, Georgia, President and Chief Financial Officer vehicle population is growing. With this stores sales. These included: November 29, 2001, when our common Louisiana, Mississippi, Alabama, and • Opening 100 to 125 new stores in strength in our market, we are focused on • Growing comparable store sales 6.2 stock began trading on the New York Stock South Carolina, reinforce our existing three key initiatives: expanding operating existing markets that meet our percent for the year on top of 4.4 Exchange. Our Chairman of the Board, network of stores in the Southeast. We now Larry Castellani margins, increasing our return on invested increased after-tax return on Chief Executive Officer percent in 2000. Nick Taubman, placed the first trade as we have the leading market position, based on capital and integrating Discount Auto Parts. investment target. • Generating total sales of more than watched “AAP” cross the ticker tape for store count, in the Southeast, which is one 4 ADVANCE AUTO PARTS ANNUAL REPORT 2001 ADVANCE AUTO PARTS ANNUAL REPORT 2001 5
  6. 6. Advance Auto Parts History Like many great companies, Advance Auto Parts was age of 34 in 1969 his leadership, the company grew from 100 the dream of one person that was expanded and & President and Chief stores in 1985 to more than 1,600 at his improved upon by others. Arthur Taubman began the Arthur Taubman, Nick Taubman, Garnett Smith, Executive Officer retirement in 2000. In 1998, we completed Founder & President, 1932 to 1969 President, 1969 to 1984 President, 1985 to 1999 company in 1932 when he purchased three home and in 1985. He made a a successful recapitalization led by Chief Executive Officer, 1985 to 1997 Chief Executive Officer, 1997 to 2000 auto supply stores in Roanoke and Lynchburg, Virginia. number of decisions Freeman, Spogli & Co. and secured our By the time of his retirement in 1969, there were 54 which were to have position as the second-largest retailers in “Advance Stores.” an extraordinary the automotive aftermarket with the But Arthur Taubman created a legacy that impact on the future of the business. acquisition of the Western Auto Supply went far beyond the leadership required to He decided to stop selling appliances Company. This acquisition alone almost grow the business. He had shaped a and other home items and concentrate doubled the number of stores we operated company culture that was built on four on the core business of auto parts, and and expanded our trade area by 20 new principles we observe to this day: changed the company’s name to Advance states in the Midwest and Northeast. • Provide a good value to the customer. Auto Parts. He also reinforced our Within eleven months, six months ahead of & President • Give the customer a reason to return commitment that people are the top priority. schedule, we converted 545 stores into Jim Wade, Bob Hedrick, Paul Klasing, David Reid, Larry Castellani, by providing good service and “At the end of the day, it is the people that Advance Auto Parts Stores. President and Chief Senior Vice President Executive Vice President Executive Vice President and Chief Executive Officer Financial Officer Human Resources Merchandising & Marketing Chief Operating Officer quality products. matter,” he said. In February, 2000 our Chief Executive • Develop a solid reputation of honesty In 1985, Garnett Smith was named Officer, Larry Castellani, joined our and integrity. President and Chief Operating Officer. He company from Royal Ahold. With a serve at each of our stores. company, our management team has the We have been fortunate that our growth • Treat employees with love and respect had risen through the ranks, beginning as a background in the supermarket industry, In addition to Larry Castellani, our experience, confidence and vision to enhance was orchestrated, by visionaries who – like family. salesperson in 1959 at our Pulaski, Virginia including being Chief Executive Officer of executive committee consists of Jim Wade, profitability and increase customer satisfaction. exemplified those words. Because of this These ideals were a formative influence store and becoming head of purchasing for Tops Friendly Markets, Larry is focused David Reid, Paul Klasing, and Bob Hedrick. Throughout our history, our leaders strong foundation of leadership, today the on Arthur Taubman’s son Nick, who the company before reaching the top post on expanding operating margins and With over 113 years combined experience have always proclaimed a consistent company is poised for continued growth became President of the company at the of Chief Executive Officer in 1997. Under increasing the number of customers we in the retail industry and 34 years with the message. “The best part is our people.” and enhanced financial performance. ADVANCE AUTO PARTS ANNUAL REPORT 2001 7 6 ADVANCE AUTO PARTS ANNUAL REPORT 2001
  7. 7. Our Stores At Advance Auto Parts, our stores are clean, eye-catching, easily navigated, members who work there. They love cars stocked with a broad selection of parts and products, and staffed with and trucks, and they communicate their people who truly care about the customer. That’s why you’ll hear Advance enthusiasm to our customers in everything Auto Parts team members speak with such pride about our stores. they do. We receive letter after letter from Come into an Advance Auto Parts store, our customers a valuable new reason to grateful people who have experienced our and it will look like it just opened, though it visit our store. It’s called APAL (Advance customer-first philosophy firsthand. They may have been open for quite some time. Parts and Accessories Lookup), and it’s rave about our team members who went That’s because we’ve set the GOLD (Grand now being rolled out to all of our stores. out of their way to deliver a part to a Opening Look Daily) standard for each of APAL is a new Windows® based electronic stranded motorist or who installed batteries our locations. It’s about providing our parts catalog of hundreds of thousands of even in the pouring rain. customers with an attractive, clean, parts that includes pictures, installation tips, Customer service is at the forefront of organized and clutter-free environment. and more, all of which can be printed for everything we do. Part of that service It’s about displaying merchandise attractively, the customer to take for reference. With comes from the heart of good people we so it can be easily found, and making sure a keystroke it also shows the customer are fortunate to have on our team. And part that prices are prominently visible. everything that will be needed to complete comes from formal training programs that Furthermore, it’s about displaying signage the job right the first time– no more we make a high priority. We train our people that tells our customers what we’re all running back to the store for forgotten on customer service, parts knowledge, about as a company. clamps or gaskets. selling skills, store operations, and We are now introducing an exciting Of course, the best part of our stores personnel issues. new tool to help our team members give is the friendly and knowledgeable team Linda Wood, Store Manager, Charlottesville, Virginia When you come into the Charlottesville store, Linda makes sure you get a friendly greeting and excellent customer continued on next page service. Under Linda’s leadership, the 23 team members at that store focus on providing outstanding customer service, as well as maintaining the stores GOLD standard. ADVANCE AUTO PARTS ANNUAL REPORT 2001 9 8
  8. 8. continued from previous page Customer service is at the heart of our Discount Auto Parts was founded in distribution system. corporate culture. Our headquarters staff 1971 by Herman Fontaine and his sons Discount Auto Parts has always focused listens to the real-world concerns that our Denis and Peter, with a single 800-square- on “Developing Customers for a Lifetime” store personnel have, and make changes foot store in Eloise, Florida. Since its by providing those things that keep customers that improve our service and operations. inception, Discount Auto Parts grew coming back: superior customer service, For example, this year we opened our under the Fontaine family leadership. convenient and accessible locations, broad Customer Contact Center, so that stores get Today it’s the leader in the Florida market, product selection, and competitive pricing. prompt attention to their questions. No with 437 stores and approximately 6,000 Since Florida is one of the fastest- longer would they have to leave a message team members. growing states in the country, and is third and wait for a return call; now they speak Members of the Discount Auto Parts in the nation in total number of cars and to a real person committed to giving them team are excited about the joining the light trucks registered, it is a strategic an answer right now. So they can serve our Advance Auto Parts team, particularly market for future growth. We are proud to customers better right now. because of the added personal growth be affiliated with Discount Auto Parts and Serving customers is what Discount opportunities. Also, the team members will its dedicated employees. We’re confident Auto Parts is all about. Discount Auto be able to say “Yes” to their customers that they will prove to customers through- Parts, which was acquired by us in more often as Discount Auto Parts’ in-store out Florida that “The best part is our November 2001, has a similar people-first product selection will increase to as many people.” philosophy (“First build the team, then the as 21,000 SKUs, with an additional 105,000 SKUs available through our PDQ® team will build the business”). Ken Wirth, Don Lockard Jr., Anthony Weatherly, Kurt Schumacher, Conley Kyle, Senior Vice President, Senior Vice President, Senior Vice President, Senior Vice President, Store Senior Vice President, Store Operations - Northeast Store Operations - West Store Operations - South Operations – Florida Store Operations - Midwest 10 ADVANCE AUTO PARTS ANNUAL REPORT 2001 11
  9. 9. Robert Bannister, Receiving Clerk Robert receives shipments from our vendors, making sure those needed immediately get into inventory. Robert says that it’s the people who make working at Advance Auto Parts special. “I wouldn’t stay somewhere if I wasn’t happy,quot; he said. quot;That’s the kind of person I am.” We will always find a way barit a svletna indara por itala gane nirata. Helo gratis helo gane nirata desdi petro. Supply Chain merchandising team is customers enter the store. Because of our Getting our customers the products they want when committed to buying our state-of-the-art systems, we can easily they want them is the mission of our supply chain. products from proven and effectively manage the inventory in Each of our stores offers our customers up to quality suppliers. We more than 2,400 locations and 125,000 21,000 items on the shelves – with an additional travel around the globe SKUs. In 2002, we will begin rolling-out 105,000 available the same or next day through our ® to be assured that our customized product selection to each of PDQ network. suppliers’ manufacturing procedures our stores further leveraging our We offer one of the largest product measure up to our standards. We offer both inventory assets. selections of brand name and private label Logistics Teams With the addition of the name brands that consumers know and automotive parts, accessories and main- trust as well as a selection of high quality Discount Auto Parts, we now have eight tenance items in the automotive after- distribution centers, nine PDQ® (Parts private label products that can be offered to market industry. But, what gives us the our customers at a substantial value. By Delivered Quickly) warehouses, and one true competitive advantage is that those Master PDQ® facility. These centers will implementing a best-in-class process, we 105,000 hard-to-find items are delivered to assure that our product selection is support both current and projected our stores seven days a week on a same or designed to meet our customers’ needs and growth for the next several years. We next day basis. Customers can come in on is priced at a substantial value. Our merch- stock products in each of the centers Friday and have a hard-to-find product in andising team continues to develop and roll based on historical sales volume for their hands, ready to install on Saturday. out exciting initiatives including category existing items, and vehicle registration Guilderland Our supply chain consists of talented Center, NY Jeffersonville, OH Youngwood, PA management and custom mix. data for new items. professionals in three responsive and Delaware, OH Riverside, MO Roanoke, VA Salem, VA Replenishment Team We’ve signi- Salina, KS Our transportation team ensures that we Smithfield, NC In summary, our supply chain is being driven by best-in-class fully integrated teams: merchandising, Goodelettesville, TN Gastonia, NC Andersonville, TN ficantly enhanced customer satisfaction utilize our fleet of trucks efficiently for technology and dedicated team members. All this preparation is replenishment, and logistics. Gadsden, AL Thomson, GA Gallman, MS by making sure seasonal and promotional both inbound and outbound deliveries to done so that our people can say to any customer who enters the Merchandising Team Product quality Temple, TX Main Distribution Centers items are in plentiful supply when achieve industry best practices. store “Sure, we’ve got that.” Lakeland, FL drives our merchandising decisions. Our PDQ Warehouses Master PDQ ADVANCE AUTO PARTS ANNUAL REPORT 2001 13 12 ADVANCE AUTO PARTS ANNUAL REPORT 2001
  10. 10. Commercial Program Although serving our do-it-yourself customers is business counted for 8.8 One of the specific reasons we’re our primary business, Advance Auto Parts has percent of our total sales. winning the hearts of commercial always had tremendous respect for professional In just three years, we customers is our ability to deliver parts that installers and the $62 billion market they represent. have grown that to more are often hard to find. Not only do we have In 1996, we launched our commercial delivery than 14 percent of our them, but we can get them in our customer’s program to serve these dedicated pros. volume (excluding hand sooner, which is a huge advantage for We currently provide this service in Discount Auto Parts). We have developed our team. In addition, these professionals about 1,370 of our stores. This this business by finding ways to better know and demand quality. The cost to fix a incremental business leverages our serve our customers, such as: mistake – not just to their profitability but • Delivering customer orders quickly. inventory and investment in our stores. to their reputation – is enormous. We offer • Offering a broad selection of quality Once again our team members make all them brand name parts, and they appreciate the difference. Commercial customers hard parts from some of the leading the difference. know their stuff, demand straight talk, and aftermarket names, including Discount Auto Parts launched a have the opportunity to purchase from a Monroe, Bendix, Purolator, Autolite program called quot;Pro2Callquot; in 1998, and number of parts suppliers. In order for and GP Sorenson. this program represents approximately 7% • Developing a commercial sales Advance Auto Parts to grow this business, of their sales. We are looking to incorporate our people had to establish personal force that is dedicated to the the best of our two programs, extending relationships with commercial customers commercial market. our commitment to the professional installer • Accessing more than 105,000 SKUs and gain their trust by knowing their and continuing to grow this segment of our business and delivering on their promises. on a same-day or next-day basis business during the coming year. through our network of PDQ® (Parts We’ve done just that, and the numbers show it. In 1998, our commercial delivery Delivered Quickly) warehouses. Junior Word, Manager, Free Service Tire Store and Todd Hoel, Commercial Parts Pro “Advance Auto Parts is our number one parts supplier,quot; said Junior Word, Manager of Free Service Tire Store, a Tennessee-based chain. “They’re our first call, and Todd does a great job for me.” Todd Hoel, who knows that commercial parts sales is a competitive business, said, “We’re always looking to see what we can do to serve our commercial customers better.” ADVANCE AUTO PARTS ANNUAL REPORT 2001 15 14
  11. 11. Report of Independent Public Accountants Advance Auto Parts, Inc. and Subsidiaries Consolidated Balance Sheets December 29, 2001 and December 30, 2000 December 29, December 30, To the Board of Directors and Stockholders of Advance Auto Parts, Inc.: (in thousands, except per share data) 2001 2000 We have audited the accompanying consolidated balance sheets of Advance Auto Parts, Inc. (a Delaware company) and subsidiaries (the Assets Company), as of December 29, 2001, and December 30, 2000, and the Current assets: related consolidated statements of operations, changes in stockholders’ Cash and cash equivalents $ 18,117 $ 18,009 equity and cash flows for each of the three years in the period ended Receivables, net 93,704 80,578 December 29, 2001. These financial statements are the responsibility of Inventories, net 982,000 788,914 the Company’s management. Our responsibility is to express an opinion Other current assets 42,027 10,274 on these financial statements based on our audits. Total current assets 1,135,848 897,775 We conducted our audits in accordance with auditing standards Property and equipment, net 711,282 410,960 generally accepted in the United States. Those standards require that we Assets held for sale 60,512 25,077 plan and perform the audit to obtain reasonable assurance about whether Other assets, net 42,973 22,548 the financial statements are free of material misstatement. An audit $ 1,950,615 $ 1,356,360 includes examining, on a test basis, evidence supporting the amounts Liabilities and Stockholders’ Equity and disclosures in the financial statements. An audit also includes Current liabilities: assessing the accounting principles used and significant estimates made Bank overdrafts $ 34,748 $ 13,599 by management, as well as evaluating the overall financial statement Current portion of long-term debt 23,715 9,985 presentation. We believe that our audits provide a reasonable basis for Accounts payable 429,041 387,852 our opinion. Accrued expenses 176,218 124,962 In our opinion, the financial statements referred to above present fairly, Other current liabilities 30,027 42,794 in all material respects, the financial position of Advance Auto Parts, Inc. Total current liabilities 693,749 579,192 and subsidiaries as of December 29, 2001, and December 30, 2000, and 932,022 576,964 Long-term debt the results of their operations and their cash flows for each of the three 36,273 43,933 Other long-term liabilities years in the period ended December 29, 2001, in conformity with Commitments and contingencies accounting principles generally accepted in the United States. Stockholders’ equity: As explained in Note 2 to the financial statements, effective December Preferred stock, nonvoting, $0.0001 par value, 31, 2000, the Company changed its method of accounting for certain 10,000 shares authorized; no shares issued or outstanding - - cooperative advertising funds. Common stock, voting, $0.0001 par value; 100,000 shares authorized; 32,692 and 28,289 issued and outstanding 3 3 Additional paid-in capital 496,538 375,209 Stockholder subscription receivables (2,676) (2,364) Accumulated deficit (205,294) (216,577) ARTHUR ANDERSEN LLP Total stockholders’ equity 288,571 156,271 Greensboro, North Carolina, $ 1,950,615 $ 1,356,360 March 5, 2002. The accompanying notes to consolidated financial statements are an integral part of these balance sheets. 16 ADVANCE AUTO PARTS ANNUAL REPORT 2001 ADVANCE AUTO PARTS ANNUAL REPORT 2001 17
  12. 12. Advance Auto Parts, Inc. and Subsidiaries Advance Auto Parts, Inc. and Subsidiaries Consolidated Statements of Operations Consolidated Statements of Operations (continued) For the Years Ended December 29, 2001, December 30, 2000 and January 1, 2000 For the Years Ended December 29, 2001, December 30, 2000 and January 1, 2000 (in thousands, except per share data) 2001 2000 1999 (in thousands, except per share data) 2001 2000 1999 $ 2,517,639 $ 2,288,022 $ 2,206,945 Net sales Pro forma effect of change in accounting principle: Cost of sales, including purchasing and warehousing costs 1,441,613 1,392,127 1,404,113 Income (loss) before extraordinary items and cumulative 9,099 - - Expenses associated with supply chain initiatives effect of a change in accounting principle $ 17,189 $ 16,391 $ (25,776) Gross profit 1,066,927 895,895 802,832 947,531 801,521 740,481 Selling, general and administrative expenses Per basic share $ 0.60 $ 0.58 $ (0.91) 1,394 - - Expenses associated with supply chain initiatives Per diluted share $ 0.59 $ 0.57 $ (0.91) 12,300 856 - Impairment of assets held for sale 3,719 - - Expenses associated with merger-related restructuring Net income (loss) $ 13,507 $ 19,324 $ (25,776) 1,135 - 41,034 Expenses associated with merger and integration 11,735 729 1,082 Non-cash stock option compensation expense Per basic share $ 0.47 $ 0.68 $ (0.91) Operating income 89,113 92,789 20,235 Per diluted share $ 0.46 $ 0.68 $ (0.91) Other, net: Interest expense 61,895 66,640 62,792 The accompanying notes to consolidated financial statements are an integral part of these statements. Other income, net 1,283 1,012 4,647 Total other expense, net 60,612 65,628 58,145 Income (loss) before provision (benefit) for income taxes, extraordinary 28,501 27,161 (37,910) items, and cumulative effect of a change in accounting principle 11,312 10,535 (12,584) Provision (benefit) for income taxes Income (loss) before extraordinary items and cumulative Consolidated Statements of Changes in Stockholders’ Equity 17,189 16,626 (25,326) effect of a change in accounting principle For the Years Ended December 29, 2001, December 30, 2000 and January 1, 2000 Extraordinary items, (loss) gain on debt extinguishment, net (3,682) 2,933 - of $2,424 and ($1,759) income taxes, respectively Additional Stockholder Total Cumulative effect of a change in accounting principle, Preferred Stock Common Stock Paid-in Subscription Accumulated Stockholders’ (2,065) - - net of $1,360 income taxes (in thousands) Shares Amount Shares Amount Capital Receivables Deficit Equity Balance, January 2, 1999 - $ - 28,262 $ 3 $ 371,580 $ (2,526) $(209,966) $ 159,091 $ 11,442 $ 19,559 $ (25,326) Net income (loss) Net loss - - - - - - (25,326) (25,326) Non-cash stock option Net income (loss) per basic share from: compensation expense - - - - 1,082 - - 1,082 Income (loss) before extraordinary items and cumulative Other - - (118) - (908) 518 (503) (893) effect of a change in accounting principle $ 0.60 $ 0.59 $ (0.90) Balance, January 1, 2000 - - 28,144 3 371,754 (2,008) (235,795) 133,954 Extraordinary items, (loss) gain on debt extinguishment (0.13) 0.10 - Net income - - - - - - 19,559 19,559 Cumulative effect of a change in accounting principle (0.07) - - Non-cash stock option $ 0.40 $ 0.69 $ (0.90) compensation expense - - - - 729 - - 729 Net income (loss) per diluted share from: Other - - 145 - 2,726 (356) (341) 2,029 Income (loss) before extraordinary items and Balance, December 30, 2000 - - 28,289 3 375,209 (2,364) (216,577) 156,271 cumulative effect of a change in accounting principle $ 0.59 $ 0.58 $ (0.90) Net income - - - - - - 11,442 11,442 Extraordinary items, (loss) gain on debt extinguishment (0.13) 0.10 - Discount acquisition (Note 3) - - 4,310 - 107,129 - - 107,129 Cumulative effect of a change in accounting principle (0.07) - - Non-cash stock option $ 0.39 $ 0.68 $ (0.90) compensation expense - - - - 11,735 - - 11,735 Other - - 93 - 2,465 (312) (159) 1,994 Average common shares outstanding 28,637 28,296 28,269 Balance, December 29, 2001 - $ - 32,692 $ 3 $ 496,538 $ (2,676) $ (205,294) $ 288,571 Dilutive effect of stock options 521 315 - Average common shares outstanding - assuming dilution 29,158 28,611 28,269 The accompanying notes to consolidated financial statements are an integral part of these statements. The accompanying notes to consolidated financial statements are an integral part of these statements. 18 ADVANCE AUTO PARTS ANNUAL REPORT 2001 ADVANCE AUTO PARTS ANNUAL REPORT 2001 19

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